budget 1997 bud

BUDGET

BUDGET OF THE UNITED STATES GOVERNMENT

Fiscal Year

1

THE BUDGET DOCUMENTS

Budget of the United States Government, Fiscal Year 1997contains a summary of the President’s budget proposals.

The following additional budget documents should be available theweek of March 18, 1996.

Budget of the United States Government, Fiscal Year1997—Supplement contains the Budget Message of the Presidentand information on the President’s FY 1997 budget proposals.

Analytical Perspectives, Budget of the United States Gov-ernment, Fiscal Year 1997 contains analyses that are designed tohighlight specified subject areas or provide other significant presen-tations of budget data that place the budget in perspective.

It includes economic and accounting analyses; information onFederal receipts and collections; analyses of Federal spending; de-tailed information on Federal borrowing and debt; the Budget En-forcement Act preview report; current services estimates; and othertechnical presentations. It also includes information on the budgetsystem and concepts and a listing of the Federal programs by agencyand account.

Historical Tables, Budget of the United States Govern-ment, Fiscal Year 1997 provides data on budget receipts, outlays,surpluses or deficits, Federal debt, and Federal employment coveringan extended time period—in most cases beginning in fiscal year1940 or earlier and ending in fiscal year 2002. These are muchlonger time periods than those covered by similar tables in otherbudget documents. As much as possible, the data in this volume andall other historical data in the budget documents have been madeconsistent with the concepts and presentation used in the 1997Budget, so the data series are comparable over time.

Budget of the United States Government, Fiscal Year1997—Appendix contains detailed information on the various ap-propriations and funds that constitute the budget designed primarilyfor the use of the Appropriations Committee. The Appendix containsmore detailed financial information on individual programs and ap-propriation accounts than any of the other budget documents. It in-cludes for each agency: the proposed text of appropriation language,budget schedules for each account, new legislative proposals, expla-nations of the work to be performed and the funds needed, and pro-posed general provisions applicable to the appropriations of entireagencies or group of agencies. Supplemental and rescission proposalsfor the current year are presented separately. Information is alsoprovided on certain activities whose outlays are not part of the budg-et totals.

A Citizen’s Guide to the Federal Budget, Budget of theUnited States Government, Fiscal Year 1997 is an Office of Man-agement and Budget publication that provides general informationabout the Budget and the budget process for the general public.

Budget System and Concepts, Fiscal Year 1997 contains anexplanation of the system and concepts used to formulate the Presi-dent’s budget proposal.

AUTOMATED SOURCES OF BUDGET INFORMATION

The information contained in these documents is available in elec-tronic format from the following sources:

• The budget documents are available on CD-ROM from STAT-USA and the Government Printing Office. For more informa-tion, see the order form at the back of this document.

• The budget documents can be accessed using a computermodem as well as on the Internet through the U.S. Depart-ment of Commerce’s STAT-USA information service. There isno charge for use of this service when used to obtain budgetinformation.

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Internet Access: Budget documents are available throughSTAT-USA’s Internet service using the file transfer protocol(ftp), gopher, and the World Wide Web (WWW) at the followingaddresses:

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For more information on access to STAT-USA informationservices, call (202) 482–1986.

• Copies of the database used to generate the budget numbersmay be purchased from the U.S. Department of Commerce,National Technical Information Service, Springfield, VA22161, telephone (703) 487–4650. Refer to stock numberPB95–502340.

GENERAL NOTES

1. All years referred to are fiscal years, unless otherwise noted.2. Detail in this document may not add to the totals due to rounding.

U.S. GOVERNMENT PRINTING OFFICEWASHINGTON 1996

For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, D.C. 20402

THE WHITE HOUSE

WASHINGTON

February 5, 1996

To the Congress of the United States:

In accordance with 31 U.S.C. § 1105(a), I am transmitting my 1997 Budget toCongress.

This budget provides a thematic overview of my priorities as we continue todiscuss how to balance the budget over the next seven years. It also includes theAdministration’s new economic assumptions.

Because of the uncertainty over 1996 appropriations as well as possible changes inmandatory programs and tax policy, the Office of Management and Budget was notable to provide, by today, all of the material normally contained in the President’sbudget submission. I anticipate transmitting that material to Congress the week ofMarch 18, 1996.

William J. Clinton

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TABLE OF CONTENTS

AN AGE OF POSSIBILITY ........................................................................................... 1

AMERICA AND THE WORLD ...................................................................................... 5

A STRONGER NATION AT HOME

Strengthening Medicare ...................................................................................... 8

Strengthening Medicaid and Expanding Health Coverage ............................... 9

Reforming Welfare ............................................................................................... 10

Making Work Pay ................................................................................................. 11

Meeting America’s Challenges ............................................................................ 12

Providing Tax Relief ............................................................................................. 13

Closing Corporate Loopholes and Other Tax Measures .................................... 14

SUMMARY TABLES ....................................................................................................... 15

1

AN AGE OF POSSIBILITYThe President’s 1997 Budget achieves two

basic objectives:

• It reaches balance in seven years, makingreal cuts in entitlements and discretionaryspending while providing modest tax re-lief; and

• It maintains our commitments to economicgrowth and to protecting the most vulner-able Americans, including senior citizens,working families, and children.

The budget strengthens Medicare and Med-icaid; invests in education and training, theenvironment, science and technology, andother priorities; reforms the welfare system;provides for a strong defense; and providestax relief to help families raise their children,send their children to college, and savefor the future.

Reaching Balance

The budget reflects the President’s mostrecent proposal in his budget negotiationswith the bipartisan congressional leadership.Because it reaches balance in 2002 by basicallyusing the economic and technical assumptionsof the Congressional Budget Office (CBO),it fulfills a goal that the President shareswith Congress. Using the economic and tech-nical assumptions of the Office of Managementand Budget, this budget projects a surplusof $40 billion in 2002.

The President believes that Congress shouldquickly enact the savings that he and congres-sional leaders have in common in their budgetproposals—savings that are sufficient not onlyto balance the budget in seven years, butto provide a modest tax cut. As the Presidentsaid in his State of the Union address,we should make permanent deficits a partof yesterday’s legacy.

To reach balance, this budget saves $596billion over seven years by reforming Federalentitlement programs, cutting deeply in discre-tionary spending, and limiting corporate sub-sidies. It saves $124 billion in Medicare,$59 billion in Medicaid, $40 billion in welfare

programs, $56 billion in other mandatoryprograms, $297 billion in discretionary spend-ing, and $59 billion in corporate subsidiesand other revenue provisions.

The budget also includes a mechanism,known as a ‘‘trigger,’’ to ensure that thebudget reaches balance under either CBOor OMB assumptions. Under this trigger,most of the tax cuts end after 2000 ifthe deficit is not at least $20 billion belowCBO’s initial estimate for that year. If, onthe other hand, the deficit is at least $20billion below estimates, then (1) the taxcuts remain in place, and (2) the amountthat exceeds $20 billion is applied, first,to reduce the discretionary spending cutsand, then, to a larger tax cut and moredeficit reduction.

Spurring Economic Growth

From the start, the President’s economicprogram has emphasized one primary con-cern—to raise the standard of living foraverage Americans now and in the future.His budget policy has played a central role.

By cutting the deficit nearly in half inthe last three years, we have reduced Federalborrowing, making more funds available inthe private markets so that businesses caninvest, grow more productive, expand, andcreate jobs. We also have shifted resourcesto education and training, science and tech-nology, and other priorities, not only tomake businesses more competitive but togive Americans the skills they need to competein the new economy.

Like the President’s previous budgets, thisbudget maintains his investments in educationand training, science and technology, environ-mental protection, law enforcement, and otherkey priorities. These include the Head Startprogram for disadvantaged children; the Safeand Drug-Free Schools and Communities pro-gram to create safe learning environments;Goals 2000, which helps States and schoolsystems extend high academic standards, bet-ter teaching, and better learning to all stu-

2 THE BUDGET FOR FISCAL YEAR 1997

dents; AmeriCorps, through which 25,000Americans a year serve their communitiesand earn money for college; lower cost studentloans with greatly increased flexibility forrepayment; Pell grant scholarships for needystudents; and Skill Grants (or job trainingvouchers) for dislocated workers and low-income adults.

The budget also protects environmentalenforcement through the Environmental Pro-tection Agency’s operating program; programsto protect national parks and other sensitiveresources; and basic and applied researchand technology development. It funds theCommunity Oriented Policing Services (COPS)initiative to put 100,000 more police onthe street by 2000; more border patrolsto prevent illegal immigration and more in-spections to prevent the hiring of illegalimmigrants; and the Community DevelopmentFinancial Institutions fund to spur growthand create jobs in communities that havebeen left behind.

In addition, the budget includes funds tolaunch the important initiatives that thePresident outlined in his State of the Unionaddress. In education, the budget funds aneducational technology initiative to connectevery classroom to the information super-highway by 2000; expanded work-study tohelp one million students work their waythrough college by 2000; a $1,000 meritscholarship for the top five percent of grad-uates in every high school; and charterschools to let parents, teachers, and commu-nities create public schools to meet theirown children’s needs.

For workers, the budget funds an initiative,which the White House Conference on SmallBusiness recommended, to make it easierfor small businesses and farmers to establishtheir own pension plans. For the environment,it funds tax incentives to encourage companiesto clean up abandoned, contaminated indus-trial properties in distressed areas. And forlaw enforcement, it provides funds with whichthe FBI and other law enforcement agencieswill launch a war on juvenile crime andgangs that involve juveniles.

A Period of Change

The Nation has entered a period of profoundchange—from an economy based on traditionalmanufacturing to one based on information—the most profound change since the trans-formation from agriculture to manufacturinga century ago. It is a period of great oppor-tunity and great uncertainty, a period thatdemands new thinking and new responses.

In this age of possibility, the United Statesmust continue to provide leadership acrossthe globe and cooperate in the communityof nations, not retreat from it. At home,the public and private sectors must worktogether; we cannot rely on just one orthe other. Americans of all generations mustcome together in the interests of all.

For this new era, we need the rightkind of Government and the right kindof policies. We need a Government thatcreates opportunity, not bureaucracy, one thatworks with State and local governments,businesses, and religious, charitable, and civicassociations. We need policies that grow themiddle class and shrink the underclass. Andwe need to invest in our future, both bybalancing the budget and by finding additionalresources for education and training, theenvironment, science and technology, andother priorities.

Government should not do for individualswhat they can do for themselves. We mustask more of ourselves, expect more of oneanother, and meet the challenges that confrontus together. We must strive to enable allof our people to make the most of theirlives with stronger families, more educationalopportunity, economic security, safer streets,a cleaner environment, and a safer world.

The Record to Date

Three years into this Administration, theNation is stronger and moving in the rightdirection. The economy continues to grow,with the lowest combined rates of unemploy-ment and inflation in nearly three decades.We have created nearly eight million newjobs—over seven million of them in theprivate sector, and a million of those inbasic industries like construction and auto-

3AN AGE OF POSSIBILITY

mobiles. Exports are at an all-time high.And we have cut the budget deficit nearlyin half, bringing down interest rates and,in turn, the costs of home mortgages, carpayments, and credit card rates.

We are also cutting the size of Government.We have reduced the Federal workforce bymore than 200,000 employees in less thanthree years, and we will continue to reducethe workforce in the years ahead. Already,we have the smallest Federal workforce in30 years; as a share of the Nation’s civilianworkforce, it is the smallest since 1933.

With the help of Vice President Gore’sNational Performance Review, we are stream-lining the bureaucracy, overhauling the pro-curement system, and delivering better serv-ice—that is, creating a Government that‘‘works better and costs less.’’ And to easethe burden on small businesses and averageAmericans, we are cutting 16,000 pages ofFederal regulations.

Meanwhile, communities across America arecoming together. Crime is down in mostmajor cities and, across America, the poverty

rate is down, the welfare rolls are down,the Food Stamp rolls are down, the teenpregnancy rate is down, and the divorcerate is down.

In the world at large, American leadershipis strong, bringing new hope for peace. Today,more people than ever live free and, withour help, peace is taking root in Haiti,in Northern Ireland, in the Middle East,and even in Bosnia, where U.S. soldiersare enforcing an historic settlement. We aresafer at home as well; today, not a singleRussian nuclear missile is aimed at America’schildren.

Honoring Our Commitments

To remain strong, we must do more thanplay a leading role on the military anddiplomatic front. We also must honor ourfinancial obligations. The President urges Con-gress to send him a straightforward, full-year extension of the Nation’s debt limit,ensuring that the United States can honorour obligations, make timely payments toSocial Security, veterans, and other bene-ficiaries, and meet other commitments.

5

AMERICA AND THE WORLDThe President’s budget provides the re-

sources to sustain the leadership role ofthe United States in the struggle for freedomand peace throughout the world.

While some voices call for a U.S. retreatinto isolationism, we have chosen to engage.Our diplomatic leadership continues to becritical to keeping the peace and defendingour interests in major regions of the world.

We have stimulated and led the peaceprocess in the Middle East, helping achievepeace between Israel and Jordan and aninterim agreement between Israel and thePalestinians and fostering continuing discus-sions between Israel and Syria. In Eurasia,we have strengthened our relationship withRussia and the other New Independent Statesand worked to secure free markets anddemocracy in that critical region. In Europe,we have crafted a comprehensive peace agree-ment among the warring factions in Bosniaand led a cooperative NATO effort to enforcethat agreement. We also lent critical supportto efforts to achieve a settlement of thelong-running conflict in Northern Ireland.In Asia, we negotiated an agreement withNorth Korea that halted, and will eliminate,its nuclear weapons program and createdan international coalition to carry out thatagreement. Throughout the globe, we leadin the struggle to strengthen democracy andfree markets, with singular successes incentral Europe, Asia, Latin America, andSouth Africa.

Not only does our leadership secure ourinterests and promote our values, it is akey ingredient in dealing with the new threatsof the post-Cold War era. Leading the globaleffort for arms reductions and nonproliferationcontinues to be an integral element of ourdiplomacy and national security strategy. Ourefforts support a broad range of programsto reduce the threat of nuclear and chemicalweapons. We are making our children’s futuresafer by reducing existing arsenals and ensur-ing that rogue states and terrorist groupsdo not acquire these terrible weapons or

the materials and technologies needed tomake them.

Other threats know no national borders;America must lead in confronting such prob-lems as ethnic and national conflicts whichthreaten regional stability; terrorism, inter-national crime, and drug trafficking, whichdirectly threaten our free and open society;and large-scale environmental degradation.

More than ever, our domestic and foreigneconomic interests are closely intertwined,and mutually reinforcing. Economic and tradeissues are increasingly at the forefront ofour diplomacy. We need a strong economyto sustain our military forces and diplomaticstrategy. And we must be global leadersin trade and investment if we are to openforeign markets and create the high-wagejobs that will raise the living standardsof our people.

With regard to trade, we have creatednew markets across the world for our exports,which have reached an all-time high. Alongwith securing legislation to implement theGeneral Agreement on Tariffs and Tradeand the North American Free Trade Agree-ment, we have completed over 80 othertrade agreements.

Our defense capability is the bulwark whichsustains and supports our diplomacy. Thisbudget continues our critical support for theworld’s strongest and most ready militaryforce—a force designed to fight successfullytwo nearly simultaneous regional conflicts.Our weapons are state-of-the-art, and ourmilitary is the best equipped, best trained,and best prepared in the world.

When necessary, we have sent the menand women of our military into action. Onlywhen U.S. forces were about to land couldour negotiators convince the unwelcome dic-tators to leave Haiti; we then reinstalledthe democratically-elected leader and, in theprocess, stemmed the large-scale migrationfrom Haiti to our borders. We worked withNATO forces to bring a cease-fire to Bosnia.


With Iraq once again threatening Kuwait,we moved quickly to send additional forcesto the region. And we saved hundreds ofthousands of lives by employing our militaryforces in humanitarian efforts in Rwanda.

America cannot be everywhere, nor canwe do everything. But where our interestsand values are sufficiently at stake and

our action can make a difference, the UnitedStates must act. In this age of possibility,it is clear that this Nation must continueto lead; our leadership has not only helpedto bring peace to long-warring nations, butit also builds on a half-century of securityand prosperity that Americans continue toenjoy.

7

A STRONGER NATION AT HOMEThis budget reaches balance in seven years

in the right way—by cutting wasteful spendingwhile upholding our commitments to seniorcitizens, to children, to working families,and to the needy.

It achieves a balanced budget in 2002,a goal to which the President is committed,by basically using the economic and technicalassumptions of the Congressional Budget Of-fice; and it achieves a surplus of $40 billionunder economic and technical assumptionsof the Office of Management and Budget.But it also protects our fundamental valuesas Americans.

The President and congressional leadershave worked hard to find agreement ona plan to balance the budget over sevenyears. While they have not finished thejob, the President believes strongly that theirnegotiations have been productive and havebrought the two sides closer together. Heis committed to doing whatever he can tocomplete the task.

In their talks, the President and the leadershave outlined a variety of proposals. Theminimum amounts of savings which the planshave in common in the major budget categories(e.g., $124 billion in Medicare, $297 billionin discretionary spending) add to some $700billion—enough to balance the budget andalso provide a modest tax cut.

To be sure, significant policy differencesremain in the negotiations—over the sizeand distribution of a tax cut; whether Medicaidcontinues to guarantee health coverage tosenior citizens, the poor, and people withdisabilities; and so on. But the Presidentbelieves the Administration and Congress

should balance the budget now, setting asidethe remaining policy differences for anotherday. He has proposed that the two sidesquickly enact the savings that they havein common and give the American peoplea balanced budget.

The President’s budget saves $596 billionover seven years. Among its major elements,the budget:

• saves $124 billion in Medicare, strengthen-ing and improving the program and guar-anteeing the solvency of the Part A trustfund for over a decade;

• saves $59 billion in Medicaid, reformingthe program but continuing the guaranteeof meaningful health and long-term carecoverage for the most vulnerable Ameri-cans;

• saves $40 billion through real welfare re-form, moving recipients to work while pro-tecting children;

• saves $297 billion in discretionary spend-ing, cutting wasteful and lower priorityspending but investing in education andtraining, the environment, science andtechnology, law enforcement, and otherpriorities that will raise living standardsand improve the quality of American life;

• cuts taxes by $99 billion, providing tax re-lief to tens of millions of middle-incomeAmericans and to small businesses; and

• saves $59 billion by ending corporate sub-sidies and other tax loopholes.

These major elements of the President’sbudget are described in more detail below.


STRENGTHENING MEDICARE

The President’s Medicare plan strengthensand improves the program, reducing spendingby a net $124 billion over seven yearsand guaranteeing the solvency of the trustfund for more than a decade. Specific reformsgive seniors more choices among private healthplans, make Medicare more efficient andresponsive to beneficiary needs, attack fraudand abuse through programs praised by lawenforcement officials, cut the growth rateof provider payments, and hold the PartB Premium at 25 percent of program costs.

Provider Payment Reforms and ProgramSavings

• Hospitals. The budget reduces the annualinflation increase or ‘‘update’’ for hospitalsand payments for capital; reforms pay-ments for Disproportionate Share Hos-pitals; and reforms the payment methodfor outpatient departments while protect-ing beneficiaries from increasing chargesfor those services.

• Managed Care. The budget reforms pay-ments by using reasonable rate-of-growthlimits on updates for managed care pay-ments and reducing the current geo-graphic variation in payments.

• Physicians. The budget reforms physicianpayments by paying a single update forall physicians and replaces current ‘‘vol-ume performance standards’’ with a sus-tainable growth rate.

• Home Health Care/Skilled Nursing Fa-cilities. The budget implements a seriesof interim payment reforms before the es-tablishment of separate prospective pay-ment systems for home health care andskilled nursing facilities.

• Fraud and Abuse. The budget introducesaggressive and comprehensive policies tostamp out Medicare waste, fraud, andabuse, and extends and enhances Medi-care secondary payor policy to ensure thatMedicare pays only when it should.

• Other Providers. The budget freezes orreduces payments for durable medical

equipment and ambulatory surgical cen-ters.

• Beneficiaries. The budget continues, butdoes not increase, the requirement thatbeneficiaries pay 25 percent of Part Bcosts.

Provisions to Improve Rural Health Care

The President’s plan enhances access to,and the quality of, health care in ruralareas. To do so, it extends the Rural ReferralCenter program, directs Medicare reimburse-ment for nurse practitioners and physicianassistants, improves the Sole Community Hos-pital program, and expands the Rural PrimaryCare Hospital program.

Program Improvements That ExpandChoices and Add Preventive Benefits

The President’s plan transforms the tradi-tional fee-for-service program from a bill-paying insurance program into a responsivehealth plan by giving Medicare the authorityto adopt many of the purchasing and qualitytechniques pioneered by private sector payors.

The budget also expands and improvesMedicare managed care by:

• ensuring beneficiary protections while in-creasing the types of plans—including Pre-ferred Provider Options (PPOs) and Pro-vider Service Networks (PSNs)—availableto seniors; and

• instituting a coordinated annual open en-rollment process—similar to that used bythe Federal Employees Health BenefitsPlan (FEHBP)—during which beneficiariesuse comparative information to chooseamong managed care and supplementalinsurance options.

In addition, the budget expands coverageof preventive benefits to include annual mam-mograms and the elimination of mammog-raphy coinsurance, colorectal cancer screening,and increased payments for flu shots. Finally,the budget introduces a respite care benefitto provide some relief for families caringfor relatives with Alzheimer’s disease.

9A STRONGER NATION AT HOME

STRENGTHENING MEDICAID AND EXPANDING HEALTHCOVERAGE

The President’s plan for Medicaid reformsthe program but preserves the guaranteeof health and long-term coverage for themost vulnerable Americans. It saves $59billion over seven years responsibly, by limit-ing spending on a per-person basis (a ‘‘percapita cap’’) and reducing DisproportionateShare Hospital payments and retargetingthem to hospitals that serve large numbersof Medicaid and uninsured patients.

The plan provides special payments forStates to transition into the new system,and to meet the most pressing needs. Italso gives States unprecedented flexibilityto administer their programs more efficiently.Finally, this plan retains current nursinghome quality standards and continues toprotect the spouses of nursing home residentsfrom impoverishment.

Program Savings

• Per capita cap. Under the budget, a percapita cap limits Federal spending growthper person while retaining current eligi-bility and benefit guidelines. This ap-proach guarantees that the elderly, peoplewith disabilities, and pregnant women andchildren who depend on Medicaid will re-main eligible for health benefits while itcuts the rate of increase in spending toa level that States and the Federal Gov-ernment can support. In contrast to ablock grant, the Administration’s plan pro-tects States facing population growth oreconomic downturns.

• Disproportionate Share Hospital Pay-ments (DSH). The budget reduces DSHpayments and retargets them to hospitalsthat serve a large proportion of Medicaidand uninsured patients, including chil-dren’s and public hospitals. It providesspecial payments for Federally QualifiedHealth Centers, Rural Health Clinics, andStates with large numbers of undocu-mented immigrants.

Provisions to Increase State Flexibility

The budget includes a number of policiesto give States more flexibility in managingtheir Medicaid programs, such as:

• Boren amendment. The plan repeals theso-called ‘‘Boren amendment,’’ eliminatingFederal provider payment requirementsfor hospitals and nursing homes.

• Managed care. The plan allows Statesto enroll beneficiaries in managed carewithout Federal waivers.

• Home- and community-based care. Theplan allows States to move populationswho need long-term care from nursinghomes to home- and community-based set-tings, without having to seek Federalwaivers.

• Coverage expansions without waivers.The plan enables States, without waivers,to expand coverage to any person whoseincome is less than 150 percent of the pov-erty line.

Protections for Low-income Seniors andNative Americans

The President’s plan retains the policyof helping low-income seniors through theshared Federal-State responsibility for theirMedicare premiums, copayments, anddeductibles. It also retains payment protec-tions for Medicaid-eligible Native Americanstreated in Indian Health Service facilities.These protections are not subject to theper capita cap.

Reforms to Make Health Coverage MoreAccessible and Affordable

In his State of the Union address, thePresident challenged Congress to enact insur-ance reforms that would enable more Ameri-cans to maintain health insurance coveragewhen they change jobs, and stop insurancecompanies from denying coverage for pre-existing conditions. This budget requires thatplans make coverage available to all groups


of businesses, regardless of the health statusof any group members. Insurers would haveto provide an open enrollment period ofat least 30 days for all new employees(whether or not they were previously insured),and insurers could not individually underwritenew enrollees—i.e., their premiums wouldhave to match other enrollees’ with similardemographic characteristics.

To increase affordability, the President’sinsurance reforms phase out the use of claimsexperience, duration of coverage, and healthstatus in determining rates for small busi-nesses. To put the self-employed on a moreequal footing with other businesses, the re-forms gradually raise the self-employed taxdeduction from 30 to 50 percent. And tohelp give small businesses the purchasingclout that larger businesses have, the budget

gives technical assistance and $25 milliona year in grants with which States canset up voluntary purchasing cooperatives.

Health Insurance for the TemporarilyUnemployed

The budget gives individuals who lose theirhealth insurance when they lose their jobspremium subsidies to pay for private insurancecoverage for up to six months. States wouldreceive funding to design and administerthe program, which would provide coveragefor about 3.8 million Americans a year.During the four-year period for which thisprogram is authorized, a Commission wouldstudy and provide recommendations to theAdministration and Congress as to makingit permanent.

REFORMING WELFARE

For too long the welfare system has under-mined the values of work and family, notstrengthened them. The Administration hasmade steady progress in reforming welfare.In 1993, the President’s economic plan gavetax cuts to 15 million working families throughthe Earned Income Tax Credit, which rewardswork over welfare. The Federal Governmentcollected a record $10 billion in child supportin 1994. The Administration has given 35States the freedom to experiment with welfareinitiatives to move people from welfare towork and protect children.

The President is determined to keep workingwith Congress to enact a bipartisan welfarereform bill that moves people from welfareto work and protects children. The President’splan repeals the existing system, replacingit with one that requires work and provideschild care so people can leave welfare forwork. It saves $40 billion over seven yearswhile promoting sweeping work-based reformand protecting children.

Time-Limited Employment Assistance andChild Protection

Everyone who can work should go to work,and no one who can work should be ableto stay on welfare forever. The budget repealsAid to Families with Dependent Children(AFDC) and replaces it with a new, time-limited, conditional entitlement in return forwork. Within two years, parents must goto work or lose their benefits, and afterfive years, benefits end. The budget givesStates new flexibility to design their ownapproach to welfare reform. At the sametime, the plan provides vouchers for childrenwhose parents reach the time limit, andprotects States in the event of economicdownturn or population growth.

The budget authorizes $3.8 billion abovecurrent law for child care to move recipientsfrom welfare to work, and to help the workingpoor. It also includes an $800 million perform-ance bonus fund to reward States that movepeople from welfare to work. It has toughnew child support enforcement measures anda new Work First program to make welfarea transitional work-based system. And itpreserves the national commitment to foster


care and adoption assistance programs, pre-serving States’ ability to respond to growingcaseloads.

Supplemental Security Income (SSI) ForDisabled Children and Others

The budget tightens eligibility standardsfor childhood disability benefits; retains fullcash benefits for all eligible children; tightenseligibility for children now on the rolls,but provides that children found ineligiblewould not lose benefits until January 1998;trims cash benefits of children in familieswith relatively higher incomes; eliminateseligibility for SSI on the basis of drugaddiction or alcoholism; adds resources formore continuing disability reviews; and pro-vides new tools to collect SSI overpayments.

Food Stamps and Child Nutrition

The budget maintains the national nutritionsafety net for the Food Stamp and ChildNutrition programs, enabling them to respondto the changing circumstances of familiesand children they serve.

Under the budget, the Food Stamp programcontinues to index basic benefits to inflation;all energy assistance counts as income; awork requirement makes adults aged 18to 50 with no dependents ineligible for FoodStamps after six months of each year unlessthey work 20 hours a week or participate

in workfare or training (although eligibilitycontinues if a State fails to supply a trainingor workfare slot); and new integrity measurescrack down on fraudulent Food Stamp traffick-ing and reduce program waste.

The budget better targets food subsidiesfor Family Day Care Homes, and makesother minor changes in Child Nutrition pro-grams.

Title XX

The President’s plan cuts the Social ServicesBlock Grant by 10 percent, beginning in1996.

Benefits for Legal Immigrants

The budget tightens sponsorship and eligi-bility rules for SSI, Food Stamps, and AFDCfor non-citizens, forcing sponsors to beargreater responsibility for those they encourageto come to the United States. It counts(or ‘‘deems’’) sponsors’ income in determiningwhether immigrants are eligible for benefits—until immigrants become citizens.

It also preserves eligibility for Medicaid;maintains the exemption for the disabledand the very elderly from deeming; andestablishes a uniform definition of eligibilityacross the AFDC, Food Stamps, SSI, andMedicaid programs.

MAKING WORK PAY

Reward should follow responsibility. Thosewho play by the rules—who work hard,especially to support a family—should seethe benefit of their efforts. With wages atthe low end of the income scale often lagging,and with the task of parenting only gettingharder, the budget provides support to makethat hard work pay.

The Earned Income Tax Credit (EITC)

The budget ensures that low- and moderate-income taxpayers are rewarded for workand helped in meeting their family responsibil-ities through the EITC. The budget protectsthe EITC’s dramatic expansion of 1993 thathelped reward work for over 15 million

families and households. Consistent with theAdministration’s multi-faceted efforts to im-prove compliance, the budget saves $5 billionby improving both the targeting of the EITCand compliance while continuing to ensurethat eligible and deserving workers can claimand receive the EITC.

The Minimum Wage

In terms of purchasing power, the minimumwage is near a 40-year low. It is wellbelow the minimum needed for a full-time,full-year worker to support a family. Thebest economic evidence suggests that a mod-erate increase in the minimum wage wouldimprove the standard of living of millions


of workers at little or no economic cost.The President proposes to increase the mini-

mum wage from $4.25 to $5.15 per hour,in two equal steps.

MEETING AMERICA’S CHALLENGES

The budget cuts discretionary spending by$297 billion over seven years, while investingin education and training; the environment;science and technology; law enforcement; andother priorities to help raise living standardsand the quality of life for average Americans.

While shifting available resources to high-priority investments, the budget also makeschoices among non-investment programs. Itlimits cuts in the most important of thosenon-investments by eliminating others andapplying recommendations of the NationalPerformance Review on cutting red tape andbureaucracy.

Nothing is more important to future livingstandards than education and training. Theworkers of today and tomorrow will needthe best education and skills they can getto acquire high-wage jobs in the new globaleconomy. The budget funds a broad agendaof life-long learning by investing in HeadStart for disadvantaged children; the Safeand Drug-Free Schools and Communities pro-gram to create safe learning environments;Goals 2000 to help States and school systemsextend high academic standards, better teach-ing, and better learning to all students;AmeriCorps to help young Americans servetheir communities and earn money for college;expanded college scholarships to cover morerecipients and increase the maximum grants;and, finally, expanded School-to-Work opportu-nities and improved job training for dislocatedworkers and low-income adults. It also fundsan educational technology initiative to makechildren technologically literate and connectevery classroom to the information super-highway by 2000; expanded work-study tohelp one million students work their waythrough college by 2000; a $1,000 meritscholarship for the top five percent of grad-uates in every high school; and charterschools to let parents, teachers, and commu-nities create public schools to meet theirown children’s needs.

The budget protects the environment andpublic health, placing a priority on environ-mental enforcement and increasing funds forthe Environmental Protection Agency’s operat-ing program—the backbone of our effortsto protect the environment. It continues thePresident’s commitment to protect the nationalparks and forests, wildlife refuges, otherpublic lands, sensitive ecosystems (such asthe Northwest Forests and South FloridaEverglades), and marine sanctuaries. Thebudget funds Superfund to protect residentsnear toxic waste sites, and gives Statesmore flexibility to ensure water quality byconsolidating the Clean Water and Safe Drink-ing Water revolving funds. In addition, thebudget supports the Agriculture Department’sWater 2000 initiative to bring clean waterto rural areas. It also promotes energy effi-ciency in Government-owned and operatedbuildings and in privately-owned buildingsthrough voluntary partnerships, and promotesthe use of alternative energy sources. Itprovides funds to address a wide rangeof research and international environmentalchallenges, including global climate change,ozone depletion, and commitments under theNorth American Free Trade Agreement. Italso funds tax incentives to encourage compa-nies to clean up ‘‘brownfields’’—abandoned,contaminated industrial properties in dis-tressed areas.

The budget also invests in science andtechnology, through a balanced mix of basicresearch, applied research, and technologydevelopment, including through cooperativeprojects with private industry and universities.It adds funds for biomedical and behavioralresearch at the National Institutes of Health,for basic research and education at the Na-tional Science Foundation, for basic researchat NASA (including Mission to Planet Earth)and other agencies, and for such importantinitiatives as the Advanced Technology Pro-gram and the Technology ReinvestmentProject.


Finally, the budget continues the President’saggressive efforts to combat crime, whichhave helped to dramatically reduce violentcrime in major cities. The budget fully fundsthe President’s Community Oriented PolicingServices (COPS) initiative, adding 23,000 morepolice in local communities across the country,bringing the total additional police underCOPS to 100,000 by 2000. Also, it fundsthe Violent Crime Reduction Trust Fund

that, among other things, will expand supportfor State and local crime-fighting activitiesand prisons. It provides funds with whichthe FBI and other law enforcement agencieswill launch a war on juvenile crime andgangs that involve juveniles. And it fundsmore border patrols to prevent illegal immigra-tion and more inspections to prevent thehiring of illegal immigrants.

PROVIDING TAX RELIEF

The President’s plan targets tax relief tomiddle-income Americans through his MiddleClass Bill of Rights, which he originallyproposed in last year’s budget. This newplan also includes estate tax relief for smallbusinesses and family farms, expandedexpensing for small businesses, pension sim-plification, and the ‘‘brownfields’’ initiativecited in the previous section.

Middle Class Bill of Rights

The President again proposes the threefeasures of his Middle Class Bill of Rights,and enhances the proposed child credit.

(1) The budget phases in a $500 taxcredit for dependent children. The full creditis available for families with incomes ofunder $60,000, and the credit is phasedout at incomes of $75,000. The taxpayerwill first calculate the effect of the childcredit (and all other credits) and then calculatethe EITC; this makes the EITC more valuableto moderate-income working families withchildren.

(2) The budget phases in a $10,000 taxdeduction for education and training expenses,including college tuition.

(3) The budget expands Individual Retire-ment Accounts (IRAs), such as by doublingover time the income limits for tax-deductibleIRAs and allowing families to make tax-free withdrawals for a range of educational,housing, and medical needs.

Small Business Estate Tax Relief Act of1996

To address the liquidity problems thatmay arise upon the death of a farmer orsmall business owner, the budget increasesthe amount of property eligible for a favorablefour percent interest rate on deferred estatetax from $1,000,000 to $2,500,000. It alsoextends the eligibility for deferral to additionalentities, and it extends the five-year interest-free deferral period and four percent interestrate provision to certain entities that cannotnow take advantage of them.

Small Business Expensing

As the President advocated in 1993, andas Congress has now agreed by includingit in the Balanced Budget Act, the budgetincreases the amount of tangible depreciableproperty that small businesses can expenseeach year from $17,500 to $25,000. (Theincrease will be phased in by annual incre-ments.)

Pension Simplification

Building on bipartisan efforts in Congress,the President proposes to simplify rules (andexpand coverage) for pension plans sponsoredby businesses of all sizes, nonprofit organiza-tions, and State and local governments, aswell as for multiemployer plans. The budgetincludes a new, simple retirement savingsplan (the National Employee Savings Trustor the NEST) for small businesses thatcombines the most attractive features of the


IRA and the 401(k) plan, minimizes adminis-trative and compliance costs, and eliminates

the need for employer involvement with theGovernment.

CLOSING CORPORATE LOOPHOLES AND OTHER TAXMEASURES

The budget saves $59 billion by cuttingcorporate tax subsidies, closing loopholes, andimproving tax compliance. It includes provi-sions that the President proposed in Decemberand others.

For example, the budget prevents corpora-tions from achieving tax arbitrage by deduct-ing interest on borrowings against life insur-ance policies on their employees or wherethe corporation owns tax-exempt obligations;addresses recent developments in tax-moti-vated financial products; curtails manipulationof the tax accounting rules; and tightens

existing rules that are designed to preventtax avoidance through expatriation and theuse of foreign trusts.

The Administration continues to supportrevenue neutral initiatives to promote sensibleand equitable administration of the tax laws.These include tax simplification initiativesand technical corrections.

In addition, the Administration supports,and wants to work with Congress to provide,revenue neutral extension of various taxprovisions that have expired.

15

SUMMARY TABLES

The Congressional Budget Office has not estimated all of the proposals in the President’s budg-et. Therefore, the following tables that use CBO December economic and technical assumptionsinclude: (1) CBO estimates of proposals where available and (2) OMB estimates based on CBO’sDecember baseline where specific CBO estimates are not available.

The remaining tables use OMB’s July technical assumptions because OMB and the agencieshave not completed their revisions. The budget documents to be released in March will containestimates using the economic assumptions contained in this budget and updated technical as-sumptions.

Table 1. The President’s Budget Proposals Under CBO Assumptions(Uses CBO December economic and technical assumptions, in billions of dollars)

1996 1997 1998 1999 2000 2001 2002 7 Year

Baseline deficit 1 .................................... 172.8 180.7 179.9 192.2 199.9 204.3 221.1 1,350.8Savings:

Discretionary ...................................... –12.5 –10.4 –18.6 –34.5 –50.9 –73.9 –96.6 –297.4

Mandatory:Medicare .......................................... –2.6 –5.7 –9.1 –16.6 –22.9 –27.3 –40.1 –124.2Medicaid .......................................... .......... –2.0 –3.1 –8.2 –10.3 –16.0 –19.4 –59.0Welfare reform ................................ –* –4.9 –6.0 –6.4 –6.9 –7.1 –8.4 –39.8EITC 2 .............................................. –* –0.7 –0.8 –0.8 –0.8 –0.9 –0.9 –5.0Other mandatory ............................ –4.4 –1.9 –1.5 –3.6 –5.4 –8.1 –26.0 –51.0

Total, mandatory ........................ –7.0 –15.3 –20.6 –35.6 –46.3 –59.4 –94.9 –279.0

Tax cuts .............................................. 3.3 14.2 16.1 18.5 24.8 19.5 2.1 98.5

Corporate loopholes and other .......... –1.7 –7.1 –8.7 –9.5 –10.2 –10.4 –11.9 –59.4

Total, policy proposals ....................... –18.0 –18.5 –31.9 –61.2 –82.5 –124.2 –201.2 –537.4

Debt service ........................................ –0.5 –1.6 –3.0 –5.5 –9.2 –14.7 –23.6 –58.1

Total savings .......................................... –18.5 –20.1 –34.9 –66.7 –91.7 –138.9 –224.8 –595.5Deficit/surplus ........................................ 154.4 160.6 145.0 125.5 108.1 65.4 –3.7 755.3

* Less than $50 million.1 OMB has adjusted CBO’s December baseline to remove the directed scorekeeping of student loan administrative costs

and to reflect the pending Supreme Court review of a lower court decision on accounting for ‘‘goodwill’’.2 Includes EITC revenues.


Table 2. The President’s Budget Proposals Under OMB Assumptions—ExcludingEffects of ‘‘Fiscal Dividend’’

(Uses OMB July economic and technical assumptions, in billions of dollars)

1996 1997 1998 1999 2000 2001 2002 7 Year

Baseline deficit ....................................... 185.4 196.8 194.5 202.2 208.4 206.5 215.5 1,409.3Adjustments:

BLS adjustments ............................ .......... –* –1.0 –3.4 –6.4 –9.5 –13.6 –33.8Fiscal bonus .................................... –1.6 –8.6 –17.5 –26.7 –36.4 –46.8 –56.0 –193.6

Subtotal, adjustments ........................ –1.6 –8.6 –18.5 –30.0 –42.7 –56.2 –69.6 –227.4December base ....................................... 183.8 188.1 176.0 172.2 165.6 150.2 145.9 1,181.9Savings:

Discretionary ...................................... –12.5 –10.4 –18.3 –35.3 –52.8 –77.1 –100.5 –306.9

Mandatory:Medicare 1 ........................................ –2.6 –5.7 –9.1 –16.6 –22.9 –27.3 –40.1 –124.2Medicaid 1 ........................................ .......... –2.0 –3.1 –8.2 –10.3 –16.0 –19.4 –59.0Welfare reform ................................ –0.3 –5.1 –5.7 –6.1 –6.8 –7.1 –8.5 –39.5EITC 2 .............................................. –0.0 –0.9 –1.1 –1.1 –1.0 –1.0 –1.0 –6.1Other mandatory ............................ –6.8 –0.8 –4.8 –5.1 –7.3 –11.8 –30.5 –67.1

Total, mandatory ........................ –9.6 –14.5 –23.8 –37.1 –48.4 –63.2 –99.4 –295.9

Tax cuts .............................................. 4.6 13.5 14.5 17.7 22.8 14.8 0.8 88.6

Corporate loopholes and other .......... –1.9 –6.3 –7.7 –9.1 –9.8 –10.1 –11.7 –56.6

Total, policy proposals ....................... –19.5 –17.7 –35.3 –63.7 –88.2 –135.6 –210.8 –570.9

Debt service ........................................ –0.6 –1.7 –3.2 –5.9 –10.0 –16.2 –25.3 –62.7

Total savings .......................................... –20.1 –19.4 –38.5 –69.6 –98.2 –151.8 –236.1 –633.6Deficit/surplus ........................................ 163.7 168.8 137.5 102.6 67.5 –1.5 –90.3 548.3

MEMORANDUM:Deficit/surplus with February eco-

nomic assumptions 3 ........................... 152.0 148.7 113.3 80.0 50.8 –9.9 –91.6 443.3

* Less than $50 million.1 Administration estimates have not been completed for Medicaid and Medicare proposals; therefore, these estimates

use CBO December economic and technical assumptions.2 Includes EITC revenues.3 Includes preliminary estimate based on the Administration’s February economic assumptions and July technical as-

sumptions.

17SUMMARY TABLES

Table 3. Application of the ‘‘Fiscal Dividend’’ to the President’s Budget Proposals(In billions of dollars)

1996 1997 1998 1999 2000 2001 2002

Deficit or surplus assuming tax cuts expire on December 31, 2000:CBO December economics ........... –154.4 –160.6 –145.0 –125.5 –108.1 –65.4 3.7OMB February economics ........... –152.0 –148.7 –113.3 –80.0 –50.8 9.9 91.6

Difference .................................. 2.4 11.9 31.8 45.4 57.3 75.3 87.9Trigger impact on OMB estimates:

Step 1—Continue tax cut ............ (20.0) –9.3 –23.7Step 2—Increase discretionary

spending .................................... (20.0) –20.0 –20.0Step 3: Not applicable

Further discretionary in-creases ................................... (5.8) –5.8 –5.8

Reserved for additional taxcuts ......................................... (5.8) (–5.8) (–5.8)

Reserved for deficit reduction . (5.8) 0.0 0.0Debt service .............................. –0.8 –2.7

Total trigger ..................................... (57.3) –35.9 –52.1OMB February deficit or surplus ... –152.0 –148.7 –113.3 –80.0 –50.8 –26.0 39.5


Table 4. The President’s Budget Proposals Under OMB Assumptions—IncludingEffects of ‘‘Fiscal Dividend’’


1996 1997 1998 999 2000 2001 2002 7 Year

Baseline deficit ............................... 185.4 196.8 194.5 202.2 208.4 206.5 215.5 1,409.3Adjustments:

BLS adjustments .................... ............ –* –1.0 –3.4 –6.4 –9.5 –13.6 –33.8Fiscal bonus ............................ –1.6 –8.6 –17.5 –26.7 –36.4 –46.8 –56.0 –193.6

Subtotal, adjustments ................ –1.6 –8.6 –18.5 –30.0 –42.7 –56.2 –69.6 –227.4

December base ............................... 183.8 188.1 176.0 172.2 165.6 150.2 145.9 1,181.9Savings:

Discretionary .............................. –12.5 –10.4 –18.3 –35.3 –52.8 –51.3 –74.7 –255.3

Mandatory:Medicare 1 ................................ –2.6 –5.7 –9.1 –16.6 –22.9 –27.3 –40.1 –124.2Medicaid 1 ................................ ............ –2.0 –3.1 –8.2 –10.3 –16.0 –19.4 –59.0Welfare reform ........................ –0.3 –5.1 –5.7 –6.1 –6.8 –7.1 –8.5 –39.5EITC 2 ...................................... –0.0 –0.9 –1.1 –1.1 –1.0 –1.0 –1.0 –6.1Other mandatory .................... –6.8 –0.8 –4.8 –5.1 –7.3 –11.8 –30.5 –67.1

Total, mandatory ................ –9.6 –14.5 –23.8 –37.1 –48.4 –63.2 –99.4 –295.9

Tax cuts ...................................... 4.6 13.5 14.5 17.7 22.8 24.1 24.5 121.6

Corporate loopholes and other .. –1.9 –6.3 –7.7 –9.1 –9.8 –10.1 –11.7 –56.6

Total, policy proposals ............... –19.5 –17.7 –35.3 –63.7 –88.2 –100.5 –161.4 –486.3

Debt service ................................ –0.6 –1.7 –3.2 –5.9 –10.0 –15.4 –22.6 –59.3

Total savings .................................. –20.1 –19.4 –38.5 –69.6 –98.2 –115.9 –184.0 –545.5Effect of February economic as-

sumptions ................................... –11.7 –20.1 –24.3 –22.6 –16.6 –8.4 –1.4 –105.0Deficit/surplus with February eco-

nomic assumptions 3 ................... 152.0 148.7 113.3 80.0 50.8 26.0 –39.5 531.3

* Less than $50 million.1 Administration estimates have not been completed for Medicaid and Medicare proposals; therefore, these estimates

use CBO December economic and technical assumptions.2 Includes EITC revenues.3 Includes preliminary estimate based on the Administration’s February economic assumptions and July technical as-

sumptions.

19SUMMARY TABLES

Table 5. The President’s Budget Under CBO Assumptions(Uses CBO December economic and technical assumptions, in billions of dollars)

1996 1997 1998 1999 2000 2001 2002 7 Year

Outlays:Discretionary ......................... 539.0 543.5 537.4 537.6 537.9 531.9 527.4 3,754.8Mandatory:

Medicare ............................ 173.9 189.2 203.9 216.7 231.9 250.9 263.5 1,529.9Medicaid ............................ 97.2 105.2 115.0 121.5 132.2 140.8 153.2 865.1Other .................................. 522.1 554.3 585.7 617.1 649.0 671.5 688.5 4,288.2

Subtotal, mandatory ............. 793.2 848.7 904.6 955.2 1,013.0 1,063.2 1,105.2 6,683.2Net interest ........................... 243.0 247.4 249.3 248.9 246.1 246.3 246.3 1,727.3

Total outlays ............................. 1,575.1 1,639.6 1,691.3 1,741.8 1,797.0 1,841.4 1,878.9 12,165.2Revenues ................................... 1,420.8 1,479.0 1,546.3 1,616.3 1,688.9 1,776.0 1,882.6 11,409.9

Deficit/surplus .............................. –154.4 –160.6 –145.0 –125.5 –108.1 –65.4 3.7 –755.3

Table 6. The President’s Budget Under OMB Assumptions—Excluding Effects of‘‘Fiscal Dividend’’


1996 1997 1998 1999 2000 2001 2002 7 Year

Outlays:Discretionary ....................... 539.0 543.5 537.4 537.6 537.9 531.9 527.4 3,754.8Mandatory:

Medicare .......................... 174.2 188.5 202.7 213.1 228.2 247.3 259.9 1,513.8Medicaid .......................... 96.1 102.5 111.3 116.3 126.1 132.8 143.0 828.1Other ................................ 524.8 561.3 586.1 612.9 642.9 659.3 673.6 4,260.9

Subtotal, mandatory ........... 795.0 852.4 900.1 942.3 997.2 1,039.4 1,076.5 6,602.9Net interest ......................... 244.6 249.3 252.2 255.1 254.4 251.0 242.9 1,749.4

Total outlays ........................... 1,578.6 1,645.2 1,689.7 1,735.0 1,789.5 1,822.4 1,846.8 12,107.1Revenues ................................. 1,414.9 1,476.4 1,552.2 1,632.4 1,722.0 1,823.9 1,937.0 11,558.8

Deficit/surplus ............................ –163.7 –168.8 –137.5 –102.6 –67.5 1.5 90.3 –548.3


Table 7. COMPARISON OF ECONOMIC ASSUMPTIONS(Calendar years)

1995 1996 1997 1998 1999 2000 2001 2002

Nominal GDP 1:Level, billions of dollars:

1996 Mid-Session Review .................. 7,091 7,470 7,879 8,310 8,765 9,245 9,745 10,268CBO December baseline .................... 7,079 7,418 7,788 8,173 8,577 9,002 9,447 9,9151997 Budget ........................................ 7,078 7,428 7,805 8,203 8,623 9,058 9,523 10,005

Percent change, fourth quarter overfourth quarter:1996 Mid-Session Review .................. 4.7 5.5 5.5 5.5 5.5 5.5 5.4 5.4CBO December baseline .................... 4.3 5.0 5.0 4.9 5.0 4.9 5.0 5.01997 Budget ........................................ 4.2 5.1 5.1 5.1 5.1 5.1 5.1 5.1

CPI–U, percent change, fourth quarterover fourth quarter:1996 Mid-Session Review ...................... 3.2 3.2 3.2 3.2 3.1 3.1 3.1 3.1CBO December baseline ........................ 2.9 3.2 3.1 2.9 2.9 2.9 2.9 3.0CBO December adjusted 2 ..................... 2.9 3.2 2.9 2.8 2.8 2.8 2.8 2.91997 Budget ............................................ 2.7 3.1 2.9 2.8 2.8 2.8 2.8 2.8

Unemployment rate, percent:1996 Mid-Session Review ...................... 5.8 5.9 5.8 5.8 5.8 5.8 5.8 5.8CBO December baseline ........................ 5.6 5.9 6.0 6.0 6.0 6.0 6.0 6.01997 Budget ............................................ 5.6 5.7 5.7 5.7 5.7 5.7 5.7 5.7

Interest rates, percent:91-day Treasury bills:

1996 Mid-Session Review .................. 5.7 5.4 5.2 5.0 4.8 4.6 4.6 4.4CBO December baseline .................... 5.5 5.3 5.0 4.7 4.2 3.9 3.9 3.91997 Budget ........................................ 5.5 4.9 4.5 4.3 4.2 4.0 4.0 4.0

10-year Treasury notes:1996 Mid-Session Review .................. 6.6 6.5 6.6 6.4 6.2 6.0 5.8 5.6CBO December baseline .................... 6.6 5.8 5.6 5.5 5.5 5.5 5.5 5.51997 Budget ........................................ 6.6 5.6 5.3 5.0 5.0 5.0 5.0 5.0

1 Assumptions do not reflect NIPA revisions announced on January 19, 1996.2 Reflects assumption that January 1997 correction for formula bias will reduce CPI growth by 0.3 percentage points

per year, as incorporated in CBO scoring of the Administration’s January 6, 1996, offer.

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